Starting an accounting business can be very profitable. With proper planning, execution and hard work, you can enjoy great success. Below you will learn the keys to launching a successful accounting business.
Importantly, a critical step in starting an accounting business is to complete your business plan. To help you out, you should download Growthink’s Ultimate Business Plan Template here.
14 Steps To Start an Accounting Business:
- Choose the Name for Your Accounting Business
- Determine the Type of Accounting Business You Will Launch
- Develop Your Accounting Business Plan
- Choose the Legal Structure for Your Accounting Business
- Secure Startup Funding for Your Accounting Business (If Needed)
- Secure a Location for Your Business
- Register Your Accounting Business with the IRS
- Open a Business Bank Account
- Get a Business Credit Card
- Get the Required Business Licenses and Permits
- Get Business Insurance for Your Accounting Business
- Buy or Lease the Right Accounting Business Equipment
- Develop Your Accounting Business Marketing Materials
- Purchase and Setup the Software Needed to Run Your Accounting Business
- Open for Business
1. Choose the Name for Your Accounting Business
The first step to starting an accounting business is to choose your business’ name.
This is a very important choice since your company name is your brand and will last for the lifetime of your business. Ideally you choose a name that is meaningful and memorable. Here are some tips for choosing a name for your accounting business:
- Make sure the name is available. Check your desired name against trademark databases and your state’s list of registered business names to see if it’s available. Also check to see if a suitable domain name is available.
- Keep it simple. The best names are usually ones that are easy to remember, pronounce and spell.
- Think about marketing. Come up with a name that reflects the desired brand and/or focus of your accounting business.
2. Determine the Type of Accounting Business You Will Launch
The next step is to determine the type of accounting business you will launch. The four main types of accounting businesses are:
- Public accounting firms – These are large businesses that offer a variety of accounting services such as auditing, financial statement preparation and analysis, and tax preparation.
- Small business accounting firms – These are smaller accounting firms that usually specialize in providing accounting services to small businesses.
- Financial consulting – These firms provide financial advice and go beyond the traditional accounting services.
- Forensic accounting – These firms specialize in investigating and uncovering financial crimes or irregularities.
3. Develop Your Accounting Business Plan
One of the most important steps in starting an accounting business is to develop your business plan. The process of creating your plan ensures that you fully understand your market and your business strategy. The plan also provides you with a roadmap to follow and if needed, to present to funding sources to raise capital for your business.
Your business plan should include the following sections:
- Executive Summary – this section should summarize your entire business plan so readers can quickly understand the key details of your accounting business.
- Company Overview – this section tells the reader about the history of your accounting business and what type of accounting business you operate. For example, are you a public accounting firm or a small business accounting firm?
- Industry Analysis – here you will document key information about the accounting industry. Conduct market research and document how big the industry is and what trends are affecting it.
- Customer Analysis – in this section, you will document who your ideal or target customers are and their demographics. For example, how old are they? Where do they live? What do they find important when purchasing products or services like the ones you will offer?
- Competitive Analysis – here you will document the key direct and indirect competitors you will face and how you will build competitive advantage.
- Marketing Plan – your marketing plan should address the 4Ps: Product, Price, Promotions and Place.
- Product: Determine and document what products/services you will offer
- Prices: Document the prices of your products/services
- Place: Where will your business be located and how will that location help you increase sales?
- Promotions: What promotional methods will you use to attract customers to your accounting business? For example, you might decide to use pay-per-click advertising, public relations, search engine optimization and/or social media marketing.
- Operations Plan – here you will determine the key processes you will need to run your day-to-day operations. You will also determine your staffing needs. Finally, in this section of your plan, you will create a projected growth timeline showing the milestones you hope to achieve in the coming years.
- Management Team – this section details the background of your company’s management team.
- Financial Plan – finally, the financial plan answers questions including the following:
- What startup costs will you incur?
- How will your accounting business make money?
- What are your projected sales and expenses for the next five years?
- Do you need to raise funding to launch your business?
4. Choose the Legal Structure for Your Accounting Business
Next you need to choose a legal structure for your accounting business and register it and your business name with the Secretary of State in each state where you operate your business.
Below are the five most common legal structures:
1) Sole proprietorship
A sole proprietorship is a business entity in which the owner of the accounting business and the business are the same legal person. The owner of a sole proprietorship is responsible for all debts and obligations of the business. There are no formalities required to establish a sole proprietorship, and it is easy to set up and operate. The main advantage of a sole proprietorship is that it is simple and inexpensive to establish. The main disadvantage is that the owner is liable for all debts and obligations of the business.
A partnership is a legal structure that is popular among small businesses. It is an agreement between two or more people who want to start an accounting business together. The partners share in the profits and losses of the business.
The advantages of a partnership are that it is easy to set up, and the partners share in the profits and losses of the business. The disadvantages of a partnership are that the partners are jointly liable for the debts of the business, and disagreements between partners can be difficult to resolve.
3) Limited Liability Company (LLC)
A limited liability company, or LLC, is a type of business entity that provides limited liability to its owners. This means that the owners of an LLC are not personally responsible for the debts and liabilities of the business. The advantages of an LLC for an accounting business include flexibility in management, pass-through taxation (avoids double taxation as explained below), and limited personal liability. The disadvantages of an LLC include lack of availability in some states and self-employment taxes.
4) C Corporation
A C Corporation is a business entity that is separate from its owners. It has its own tax ID and can have shareholders. The main advantage of a C Corporation for an accounting business is that it offers limited liability to its owners. This means that the owners are not personally responsible for the debts and liabilities of the business. The disadvantage is that C Corporations are subject to double taxation. This means that the corporation pays taxes on its profits, and the shareholders also pay taxes on their dividends.
5) S Corporation
An S Corporation is a type of corporation that provides its owners with limited liability protection and allows them to pass their business income through to their personal income tax returns, thus avoiding double taxation. There are several limitations on S Corporations including the number of shareholders they can have among others.
Once you register your accounting business, your state will send you your official “Articles of Incorporation.” You will need this among other documentation when establishing your banking account (see below). We recommend that you consult an attorney in determining which legal structure is best suited for your company.
5. Secure Startup Funding for Your Accounting Business (If Needed)
In developing your accounting business plan, you might have determined that you need to raise funding to launch your business.
If so, the main sources of funding for an accounting business to consider are personal savings, family and friends, credit card financing, bank loans, crowdfunding and angel investors. Angel investors are individuals who provide capital to early-stage businesses. Angel investors typically will invest in an accounting business that they believe has high potential for growth.
6. Secure a Location for Your Business
Having the right space can be important for your accounting business, particularly if you’d like to meet clients there.
To find the right space, consider:
- Driving around to find the right areas while looking for “for lease” signs
- Contacting a commercial real estate agent
- Doing commercial real estate searches online
- Telling others about your needs and seeing if someone in your network has a connection that can help you find the right space
7. Register Your Accounting Business with the IRS
Next, you need to register your business with the Internal Revenue Service (IRS) which will result in the IRS issuing you an Employer Identification Number (EIN).
Most banks will require you to have an EIN in order to open up an account. In addition, in order to hire employees, you will need an EIN since that is how the IRS tracks your payroll tax payments.
Note that if you are a sole proprietor without employees, you generally do not need to get an EIN. Rather, you would use your social security number (instead of your EIN) as your taxpayer identification number.
8. Open a Business Bank Account
It is important to establish a bank account in your accounting business’s name. This process is fairly simple and involves the following steps:
- Identify and contact the bank you want to use
- Gather and present the required documents (generally include your company’s Articles of Incorporation, driver’s license or passport, and proof of address)
- Complete the bank’s application form and provide all relevant information
- Meet with a banker to discuss your business needs and establish a relationship with them
9. Get a Business Credit Card
You should get a business credit card for your accounting business to help you separate personal and business expenses.
You can either apply for a business credit card through your bank or apply for one through a credit card company.
When you’re applying for a business credit card, you’ll need to provide some information about your business. This includes the name of your business, the address of your business, and the type of business you’re running. You’ll also need to provide some information about yourself, including your name, Social Security number, and date of birth.
Once you’ve been approved for a business credit card, you’ll be able to use it to make purchases for your business. You can also use it to build your credit history which could be very important in securing loans and getting credit lines for your business in the future.
10. Get the Required Business Licenses and Permits
Accounting businesses need the following licenses and permits:
- A business license
- An accounting firm permit (if required in your state)
- A tax identification number from the IRS (EIN)
- Workers compensation insurance (if you will be hiring employees)
- State sales tax permits (if you will be selling goods and services that require a sales tax to be collected
Every state, county and city has different business license and permit requirements.
Nearly all states, counties and/or cities also require:
- Zoning Approval: typically at the city or county level, this provides authorization for construction or use of a building or land for a particular purpose
- Fire Department Approval: a process by which the local fire department reviews and approves the installation of a fire alarm system.
Depending on the type of accounting business you launch, you will have to obtain the necessary state, county and/or city licenses.
11. Get Business Insurance for Your Accounting Business
There are several types of insurance that accounting businesses should consider, such as:
- General liability insurance: This covers accidents and injuries that occur on your property. It also covers damages caused by your employees or products.
- Auto insurance: If a vehicle is used in your business, this type of insurance will cover if a vehicle is damaged or stolen.
- Workers’ compensation insurance: If you have employees, this type of policy works with your general liability policy to protect against workplace injuries and accidents. It also covers medical expenses and lost wages.
- Commercial property insurance: This covers damage to your property caused by fire, theft, or vandalism.
- Business interruption insurance: This covers lost income and expenses if your business is forced to close due to a covered event.
- Professional liability insurance: This protects your business against claims of professional negligence.
Find an insurance agent, tell them about your business and its needs, and they will recommend policies that fit those needs.
12. Buy or Lease the Right Accounting Business Equipment
When starting an accounting business, you will need to purchase or lease equipment, such as:
Computer systems: These will be used to organize and store financial records, track customer data, process payroll, and issue invoices.
Furniture and office supplies: Office furniture such as desks, chairs, filing cabinets, and office supplies such as paper, pens, and other office essentials are necessary for a successful accounting business.
When purchasing equipment, consider how long you plan to stay in business and how much money you have to invest. Leasing is typically less expensive upfront than buying. However, if you plan to keep the equipment for an extended period of time, it may be more cost-effective to purchase.
13. Develop Your Accounting Business Marketing Materials
Marketing materials will be required to attract and retain customers to your accounting business.
The key marketing materials you will need are as follows:
- Logo: Spend some time developing a good logo for your accounting business. Your logo will be printed on company stationery, business cards, marketing materials and so forth. The right logo can increase customer trust and awareness of your brand.
- Website: Likewise, a professional accounting business website provides potential customers with information about the products and/or services you offer, your company’s history, and contact information. Importantly, remember that the look and feel of your website will affect how customers perceive you.
- Social Media Accounts: establish social media accounts in your company’s name. Accounts on Facebook, Twitter, LinkedIn and/or other social media networks will help customers and others find and interact with your accounting business.
14. Purchase and Setup the Software Needed to Run Your Accounting Business
Software that will help you run your accounting business includes:
Accounting software: This will help you manage customer invoices, track expenses and payroll, and more.
Tax preparation software: This software helps you prepare taxes for individuals and businesses quickly and accurately.
Customer Relationship Management (CRM) software: This will help you keep track of your customers’ data including contact information, invoices and payments, history of purchases and more.
When shopping for software, look for those that are user-friendly and have the features you need to run your accounting business effectively.
Research the software that best suits your needs, purchase it, and set it up.
15. Open for Business
You are now ready to open your accounting business. If you followed the steps above, you should be in a great position to build a successful business. Below are answers to frequently asked questions that might further help you.
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How to Start an Accounting Business FAQs
Is it hard to start an accounting business?
There is no one-size-fits-all answer to this question, as the ease or difficulty of starting an accounting business will vary depending on your skills, experience, and resources.
However, if you follow the steps above, you should be able to start your accounting business without too much difficulty.
How can I start an accounting business with no experience?
First, consider if starting an accounting business is the right decision for you. It can be difficult to start and run a business without any prior experience.
If you decide that starting an accounting business is the right choice for you, then there are a few things you can do to increase your chances of success:
- Take a course or get certified in accounting.
- Connect with experienced accountants and ask for advice.
- Use the right software to help manage your business efficiently.
- Research local laws, regulations, and taxes that apply to your business.
What type of accounting business is most profitable?
The type of accounting business that is most profitable varies depending on the country and the specific services offered. However, most accounting businesses offer services such as bookkeeping, preparing taxes, and providing financial advice.
In general, the most profitable accounting businesses are those that offer a wide range of services, have a lot of experience, and are well-connected with local businesses and individuals. If you are starting an accounting business, it is important to research the competition and find a niche that you can specialize in.
How much does it cost to start an accounting business?
The cost of starting an accounting business can vary depending on a number of factors, such as the country where you are located, the type of accounting business you want to start, and the amount of equipment and software you need. The average startup costs ranges between $5,000 and $10,000. However, depending on how large your business is you may need to invest more than this.
What are the ongoing expenses for an accounting business?
The ongoing expenses for an accounting business vary depending on the size and scope of the business. However, this can vary depending on how many employees you have, how much equipment and software you need, how large your office space is, and how much marketing you do.
How does an accounting business make money?
An accounting business can make money in a number of ways, including charging clients for services, charging for products, or charging hourly rates. In some cases, an accounting business may also receive commissions or fees from other businesses for referring clients or providing services.
The most common way to make money as an accounting business is by charging clients for services rendered. This can include fees for bookkeeping, preparing taxes, financial advice, and other services. In addition to this, accounting businesses may also sell products such as books, software, or other materials related to accounting. Finally, accounting businesses may charge hourly rates for services provided.
Is owning an accounting business profitable?
Yes, owning an accounting business can be very profitable.
Accounting business owners can earn a very good income. The profitability of an accounting business depends on how much revenue is generated and how efficiently expenses are managed. Accounting businesses may also earn additional income from commissions or fees they charge for referring clients to other businesses.
Some of the key things you can do to make your accounting business more profitable include:
- Offering a variety of services that appeal to a wide range of clients
- Investing in advertising and marketing materials
- Keeping expenses low
- Charging competitive rates
- Offering add-on services that complement your main offering
- Optimizing your website for SEO to increase online visibility
- Creating a unique selling proposition
- Providing outstanding client service
Why do accounting businesses fail?
There are a number of reasons why accounting businesses can fail, such as:
- Not keeping up with industry trends and the latest technology available.
- Poor marketing or lack of visibility in the market.
- Failing to invest in training, which results in a lack of knowledge and expertise.
- Not differentiating yourself from competitors by offering unique services that cater to a specific niche market.
One of the main reasons that accounting businesses fail is a lack of planning. This can include not having a detailed business plan, not doing research on the industry, and not targeting the right customers.
Another reason is a lack of marketing and sales skills. This can include not creating a sales process and not have a clear and strong value proposition.
The last main reason is a lack of financial management skills. This can include not having a realistic budget, not tracking expenses, and not investing in the business.
Who are key players in the accounting market?
The accounting market is made up of a variety of different players, including small businesses, large enterprises, and even individuals.
Some of the key players in the market include:
- Ernst & Young
- Grant Thornton
However, there are many other players in your specific target market, and it is important to research the market to identify the key players that may have the most direct influence on the success of your business.
How much should I charge for my accounting services?
Accounting fees can vary depending on the type of accounting services being offered, as well as the size and scope of the project.
However, some common accounting fees include:
- Hourly rate - $50 to $150 per hour
- Flat rate - $50 to $200 per project
- Retainer fee - a monthly fee that covers a certain number of hours of work
The best way to determine the right fee for your accounting services is to research the rates of similar businesses in your industry, and to also consider the value that you will be providing to the client.